This is the most commonly and basic methodology of loyalty program, which fits into any kind of business. Theearned points of customers translate into some reward which can be a freebie, a discount or customer treatment. Customers, to redeem their earned reward, will always move towards a certain amount of points. There are many companies which falter in this method but making the relationship between tangible rewards and earned points can be complex and confusing. For example: 14 points equals 1 dollar, and with 20 dollars one can earn 50% off in next purchase after some month. This is not rewarding but rather a headache to the customer. If one opt for a points-based loyalty program, one should keep the conversions intuitive and simple. Bolco is one example of a company which uses loyality program based on points. To make it convinient for their audience, they measure points in dollars, the reward for which is given in terms of food items. Customers can very well swipe their stylishBoloco cardat every purchase; the card automatically tracks the money spent. The program is such that, with expenditure of every $50, the customer earns a free item. It is of no relevance whether the customer choose a burger or an chocolate pie – it is free after $50. This cites an example of a company which is simplifying points by accessible reward system for customers. The most common loyality program but it is not applicable everywhere. It is most appropriate for certain businesses that favours short-term and regular purchases.
Use of Tier System to Reward Initial Loyalty
In case of designing loyality programs, The major challenge for most companies to to find a balance between attainable and desirable rewards. One of the ways to combat this so as to implement tiered system. The idea is to offer small rewards initially to be the part of the program as a base offering, then increase the rewards’ value as the customer climbs up the loyalty ladder, so as to foster repeat customers. This will help solve the problem of members forgetting about their points. Few customers are the victim of forgetfulness and they never redeem them because of a long time span between purchase & gratification.
Virgin Airlines’Flying Clubinducts members at the Club Red tier, then divides them into Club Silver and Club Gold. On one side, members of Club Red earn points on flights and they use the discounts on rental cars, hotels; members of Club Silver earn more 50% miles on flights, or expedited check in, or priority stand by seating. Other than this, members of Club Gold gets boarding on a priority basis, double miles, even they can use exclusive clubhouses where they get premium services like free drink or massage service while waiting for their flight. The idea over here is to provide benefits during the start itself so as to hook customers for repeat purchase. Once they do, they will realize that 'gold' status is not unattainable, and it offers really cool benefits.
The difference that lies between earning points and tiered systems is that customers derive short-term benefit in one whereas the other provides long-term value. But it is a fact that tiered programs work better for high commitment or higher price-point businesses like hospitality businesses, airlines or insurance companies.
Charging an Upfront Fee for providing VIP Benefits
Loyalty programs are supposed to break down barriers between customers and business. But the question is that if we should inform them that we chargethema fee. In some circumstances, a one-time annual fee can be charged that lets customers bypass common purchase blockers. It is beneficial for both business and customer in a similar fashion. A fee-based loyalty program can be customized to resolve the specific barriers that might influence a customer to leave.
In 2011,a trend of abandonment of ecommerce shopping cart rose to hit a record as high as 72%, and it is still rising. The cause of this was 'sticker shock' that involves the after tax and shipping prices. The biggest player of E-commerce, Amazon, devised a method to combat this particular issue arising in their loyalty program. The method was called ‘Prime’. Prime users receive 2-day free shipping on any number of products with no minimum purchase. This was among other benefits only for $79 annually fee.
This program is innovative as it charges loyal customers and provides sufficient for those frequent shoppers to realize that they are benefited from this program.It has been estimated by analyststhatfor each Prime subscriber, Amazon actually loses about $11 annually. But it manages it through increased transactional frequency that would not have happened if they hadn’t offered these exclusive benefits.
To summerize, this system is mainly applicable to businesses that involves frequent, repeat purchases. In return of an one time upfront fee, your customers could avoid the inconveniences that could have hindered their future purchases. Amazon has mastered this for e-commerce, but there is also potential of this loyalty program model to work for B2B.
Structure Non-Monetary Programs Around Your Customer's Values
To really understand your customer means to understand their values and worth. And depending on industry, customers may find more value in discounted or non-monetary rewards. Among all the companies that offer promotional coupons and discount codes, only those businesses providing value to the customer base in ways apart from direct monetary benefits have an opportunity to know their audience, really connect with them and sustain them for a longer period of time.
Patagonia is an eco-friendly outdoor apparel company that realized that the need of their customer is something more than just points or discounts that they get from a loyalty program. The company invented and implemented its ‘Common Threads Initiative’. They partnered with eBay for this initiative in which they help customers in online reselling of their highly durable Patagonia clothing, through the company website.
This program has dual advantage, firstly it builds on their brand of sustainability while creating a product of high quality, and secondly it matches perfectly with the company’s customer personality by delivering values that they actually care for. So a through research is essential before implementing any loyalty program of this nature. Then it needs to be designed with an understanding of in-depthcustomer pyschology
Partner with another Company so as to provide All-Inclusive offers
Strategic partnerships for customer loyalty / coalition programs, can be extremely effective for company growth and customer retention. Again, fully understanding customers’ every-day lives as well as their purchase habits is a good indicator to determine the company which will be a good fit as a partner.
One example is American Express. It has a huge base of partners with companies across the country. Their recent Twitter Sync campaignrewards customers for tweeting about them. The rewards are in form of discounts or some deals with Twitter #hashtags. Another example is Visibli.com whose cardholders have redeemed more than $2,000,000 as rewards. Participating companies that are also benefitting from their coalition with Amex which include Staples, Whole Foods, and Zappos.
For example, a dog food company, can partner with a veterinary office or with a pet grooming facility and they can in combination offer co-branded deals delivering mutual benefits both for company and customer. The target audience of the company obviously owns a dog, therefore any kind of service that dog requires offer certain added value from the company. When customers are provided with value beyond what the company can offer, it will show the company understands its customers, and the network grows to reach the partners’ customers.
Make a Game Out of It
All of us loves to play games. So, the loyality program is moulded in form of games to add fun factor and to encourage repeat customers. Also, depending on the type of game one choose, help solidify one’s brand's image.
Example - GrubHub, an online food ordering to delivery website, startedYummy Rummy. Once customers place 3 unique orders through GrubHub, and regardless of price, they gets to play a game and a chance of winning freebies. Players choose 1 of 4 cards and he/she has a 25 percent probability of winning a dessert, drink, gift card or other stuff for free of cost.
It’s very important that customers understand they are not duped out of rewards.The odds should not be lower than 25%; the purchase requirements to get a chance to play should be easily attainable.This kind of loyalty program has full potential to backfire but onlyif it creates a bad impression in customers and they feel like your company’s jerking them around to win profit. If it is executed properly, this kind of program could work for almost any types of company, even anoff the path B2B company. In case the targeted audience enjoys this, then he/she tends to purchase frequently. This kind of program can make the buying process much more fun and engaging.